2015 (11) TMI 1776 - AT - Income Tax

Penalty levied u/s 271(1)(c) - non recording of satisfaction by AO - effective ground of appeal of the assessee is that in absence of any satisfaction recorded in the assessment order, the penalty has been imposed without any jurisdiction and also, the assessee was not provided sufficient opportunity of being heard - HELD THAT - AO has failed to record prima-facie satisfaction for initiate penalty proceeding in the assessment order passed under section 144 of the Act, respectfully following the judgement of the jurisdictional High court in the case of Madhushree Gupta 2009 (7) TMI 38 - DELHI HIGH COURT and decision of the Tribunal in the case of Triveni Engineering and Industries Ltd. 2013 (11) TMI 174 - ITAT DELHI we hold that in absence of any prima-facie satisfaction recorded by the ld. Assessing Officer for initiation of penalty in the assessment order, the penalty levied by the AO is without any jurisdiction and void ab-initio, therefore, order of the learned Assessing Officer passed under 271(1)(c ) of Act is quashed - Decided in favour of assessee.

Summary

Issues:
1. Penalty levied under section 271(1)(c) of the Income Tax Act, 1961 without jurisdiction.
2. Absence of prima facie satisfaction recorded in the assessment order for penalty initiation.

Analysis:

Issue 1: Penalty levied under section 271(1)(c) without jurisdiction
The appeal was filed against the penalty levied under section 271(1)(c) of the Income Tax Act, 1961. The assessee argued that the penalty was imposed without assuming jurisdiction as per law and without considering the facts and circumstances of the case. The Assessing Officer completed the scrutiny assessment under section 144 of the Act, adding the difference in gross receipt to the total income of the assessee. The penalty proceedings were initiated for concealment/furnishing inaccurate particulars of income. The main contention was the absence of satisfaction recorded in the assessment order for the penalty imposition.

Issue 2: Absence of prima facie satisfaction for penalty initiation
The Authorized Representative of the assessee contended that the Assessing Officer failed to record satisfaction for initiating the penalty under section 271(1)(c) in the assessment order. The absence of prima facie satisfaction was considered a jurisdictional defect, rendering the penalty order without jurisdiction. The Tribunal analyzed the assessment order and found no mention of penalty proceedings initiation. Relying on the judgment of the jurisdictional High Court and a decision of the Tribunal, it was concluded that the penalty was imposed without prima facie satisfaction, making it void ab-initio. The Tribunal set aside the penalty order as it lacked jurisdiction due to the absence of recorded satisfaction.

In conclusion, the Tribunal allowed the appeal, quashing the penalty order as it was imposed without jurisdiction and void ab-initio. The decision was based on the failure to record prima facie satisfaction for initiating the penalty proceedings, as mandated by law. The remaining grounds of the assessee were not adjudicated upon, and the appeal was allowed in favor of the assessee.